New European Regulation aimed to provide adequate, and consistent, information to a retail investor before an investment is made comes into force on 29 December 2014 – although it will not actually apply in Member States until 31 December 2016. This gives time to put into place necessary changes to processes and procedures.
The provisions are for Key Information Documents (KID) which will apply to Packaged Retail and Insurance-based Investment Products (PRIIPs).
The Regulation will apply to both those persons advising on, or selling, PRIIPs and to PRIIP ‘manufacturers’. Manufacturers might include; fund managers, insurance undertakings, credit institutions and investment firms.
A PRIIP broadly is ‘a product’ that is exposed to market fluctuations. Accordingly, a ‘fund’ would be captured but not an individual share. Certain ‘products’ are specifically excluded from the definition, including pension products, occupational pension schemes and deposits.
The Penalty for infringement can be a fine of up to €5m or up to twice the amount of the relevant profits gained or losses avoided.
Although the Regulation applies from 31 December 2016 there is an extension to 31 December 2019 for UCITS Management Companies (OEICS and UTs). The extended time frame reflects the fact that UCITS schemes are already required to have a Key Investor Information Document (KIID) which is similar.
